Dapper Labs, the developer of NBA Top Shot, is being sued for allegedly selling the non-fungible tokens (NFTs) as unregistered securities.

NBA Top Shot is a blockchain-based digital collectibles platform that allows users to buy, sell and trade video highlights, called moments, as NFTs. Demand for the product has exploded this year, and Dapper is reportedly raising new funding at a $7.5 billion valuation.

The allegations are based on lead plaintiff Jeeun Friel’s “personal knowledge,” according to documents filed Wednesday in the Supreme Court of New York.

The documents claim that NBA Top Shot moments are securities because their value increases with the success of the project. The plaintiff says Dapper should therefore be registered with the U.S. Securities and Exchanges Commission, which Dapper Labs has allegedly failed to do.

The company is also said to have used its control of NBA Top Shot to prevent investors from withdrawing funds for “months on end,” ensuring the money stays on the platform “propping up” its value.

As a result, the plaintiff is seeking rescissory damages with respect to moments purchased since the platform’s launch in June 2020.

Dapper Labs has 30 days to respond to the summons. The company didn’t immediately respond to an email seeking comment.

Read the full complaint:

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